- Some Adani shares fell 20% on Friday as the sell-off spread.
- Investors await impact on Adani Enterprises share sale
Shares of Adani Group companies have lost more than $30 billion in market value in less than two sessions as a sell-off triggered by the scathing report by US short-seller Hindenburg Research deepened on Friday.
The defeat is putting pressure on billionaire Gautam Adani, Asia’s richest man, as it erodes his net worth and threatens to sour investor sentiment toward his flagship firm Adani Enterprises Ltd’s sale of $2.5 billion shares. That’s India’s largest public offering of primary follow-up.
Some shares of the group such as Adani Green Energy Ltd. and Adani Transmission Ltd. fell more than 15% each on Friday. Adani Enterprises lost as much as 6.2%, falling below the 3,276 rupee level at which anchor investors were allocated shares in the sale of additional shares. Adani’s stock lost $12 billion in market value on Wednesday. Indian markets were closed on Thursday.
The New Year started badly for Adani’s shares, which were among the best performers in Asia in 2022. Adani Enterprises has risen more than 3,600% over the past five years, a rally that surpassed even Elon Musk’s Tesla Inc., and along with gains in other shares of the group made Adani Asia the richest man in Asia. Hindenburg is not the first research firm to express concern about the group. CreditSights, a unit of Fitch Group, said in an August report that the conglomerate is “deeply overleveraged” with “stretched balance sheets.”
“The issues strike at the heart of the Indian corporate sector scene, where several family-controlled conglomerates dominate. By their very nature, they are opaque, and global investors have to assume confidence in corporate governance issues,” said Gary Dugan, executive director of the Global CIO Office.
“After last year’s stellar performance, Indian stocks and shares of any high-profile company are open to the downside risk of profit-taking. Therefore, the Indian stock market, in general, could be at risk of a further decline, with Adani as a catalyst.”
India’s benchmark S&P BSE Sensex index lost more than 1% to be the worst performer in Asia on Friday.
Hindenburg issued a report on Jan. 24 making wide-ranging allegations of corporate negligence following a two-year investigation into Trump’s companies. Adani Group has said it is exploring legal action after a “maliciously malicious and uninvestigated” report from the short seller. Hindenburg has said he fully supports his report, adding that any legal action taken against him would have no merit, according to a statement on Twitter.
Companies linked to the Adani Group plan a detailed response Friday to the report they labeled “false,” according to bondholders who joined a conference call with Adani executives. On the call, investors were told that the U.S.-based short seller’s claims of accounting fraud were “devoid of facts.”
“It looks like there could be more inconvenience and this report may become a big legal issue as it is also causing reputational damage,” said Sameer Kalra, founder of Target Investing in Mumbai.
The timing of Hindenburg Research’s report has confused market watchers, as it came as Adani Enterprises was looking to attract a wider network of local and global investors for its share sale. The offering already attracted many anchor investors before Hindenburg’s report made headlines, though retail investors and high-net-worth individuals can bid for shares starting today through Jan. 31.
“Timing is everything for traders in the market, and the current situation with Adani’s FPO launch and negative reporting has helped traders capitalize on the situation,” said Deven Choksey, managing director of KRChoksey Holdings in Mumbai.
Source: Bloomberg
